Hedge fund billionaire’s moral index

Corporate social responsibility is billionaire’s goal

By Alessandra Stanley, New York Times

January 8, 2016

Photo: New York Times File Photo

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The Hedge Clippers, a coalition of labor groups and community activists, protest the influence of hedge-fund managers and hold up a message for one in particular, hedge fund billionaire Paul Tudor Jones II, as they walk wards his home in the wealthy neighborhood of Belle Haven, Greenwich, Conn. Jones is working with the self-help star Deepak Chopra to rate how companies treat workers, society and the environment. less

The Hedge Clippers, a coalition of labor groups and community activists, protest the influence of hedge-fund managers and hold up a message for one in particular, hedge fund billionaire Paul Tudor Jones II, as ... more

Photo: New York Times File Photo

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In March, the Hedge Clippers, a coalition of labor groups and community activists, marched on the Greenwich, Connecticut, estate of Paul Tudor Jones II to protest the influence of hedge fund managers. Jones recently said that traditionally there are three ways to change income inequality: “By revolution, higher taxes or wars.” His alternative is Just Capital. less

In March, the Hedge Clippers, a coalition of labor groups and community activists, marched on the Greenwich, Connecticut, estate of Paul Tudor Jones II to protest the influence of hedge fund managers. Jones ... more

Photo: New York Times File Photo

Hedge fund billionaire’s moral index

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Paul Tudor Jones II, a hedge fund billionaire, has a plan to reduce income inequality. He wants to rate companies on their probity, not their profits.

“The wealth gap, that’s the single most important issue in this country,” he said while unveiling Just Capital, a nonprofit organization that he created with Deepak Chopra, a spiritual self-help author and wellness entrepreneur who taught Jones how to meditate.

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Just Capital will rank corporations on how well, or “justly,” they treat employees, society and the environment. The idea is to laud companies that offer better pay, happier workplaces and greater transparency — and perhaps shame others to follow suit.

This kind of moral index “could not only impact investors, it could impact consumers,” Jones said. “It might impact the way companies hire, the way people go and work with companies. It will impact boardrooms, everything.”

Today, with a presidential election looming and calls for the wealthy to pay more in taxes coming not only from populist politicians but also from billionaires such as Warren Buffett, even members of the top 1 percent of the 1 percent are inveighing against the wealth gap.

“The middle-class guy who’s making the $50,000 a year realizes, ‘I’m being taken advantage of,’” warned Carl Icahn, a corporate raider turned activist investor, in a video titled “Danger Ahead” that he released last year.

While there has not exactly been a groundswell among the wealthy to significantly raise their taxes, Icahn and Buffett are among several of the United States’ top earners who have endorsed changing the tax loophole that treats a large portion of private equity and hedge fund managers’ income — known as carried interest — as more lightly taxed capital gains and require it to be taxed as regular salary. In a statement responding to questions for this article, Jones said his “strong opinion” was that carried interest should be taxed as ordinary income.

“Billionaires see a backlash coming,” said Sam Wilkin, an economist and author of “Wealth Secrets of the One Percent.”

Jones has experienced it firsthand. In March, the Hedge Clippers, a coalition of labor groups and community activists, marched on his Greenwich, Connecticut, estate to protest the influence of hedge fund managers.

At the same time, some of the United States’ wealthiest are responding with an unprecedented flood of money into politics, largely supporting Republican candidates who have pledged to cut taxes. A New York Times investigation documented in October how 158 families were responsible for almost half the money raised in the current presidential race. People from the finance industry lead the list.

Jones recently said that traditionally there are three ways to change income inequality: “By revolution, higher taxes or wars.” His alternative is Just Capital.

Jones argues that income inequality is being driven by what he calls “shareholder hegemony,” the principle that companies first and foremost should satisfy investors. The solution is for companies to make social responsibility as important as profits and share price.

Jones, who declined to be interviewed, has a net worth Forbes estimates at $4.7 billion and was one of the few hedge fund managers who foresaw the 1987 market crash. He is known for founding the Robin Hood Foundation, a charitable organization started in 1988 that raised $101 million last year for anti-poverty programs in New York.

Just Capital’s mission fits into an existing trend. Socially responsible investing, the favoring of companies that demonstrate environmental and social awareness, is a growing movement, driven in large part by millennials and women. As of December, Morningstar said about 2 percent of the mutual funds it tracked were tagged “socially conscious.” Such funds “typically perform on par or a little better than conventional funds,” said Jon Hale, director of manager research at Morningstar.

Not all economists agree with Jones’ notion that monitoring corporate behavior would narrow the distance between the very rich and the rest. Wilkin argued that inequity was driven not just by bloated executive compensation or the single-minded pursuit of profit but also by what he called a two-tier economy in which some industries, such as technology, finance and health care, soared ahead and left the rest behind. Just Capital was “wishful thinking that there is a market solution to income inequality that doesn’t involve increasing taxes.”

There are many nonprofits that seek to address income inequality. Jones and Chopra bring a waft of New Age spirituality to theirs. The Just Capital board includes Arianna Huffington, a founder of the Huffington Post, and several wealthy business leaders who also are directors of the Chopra Foundation.

Chopra was behind the creation of Just Capital. In 2011, after being a featured guest at several Occupy Wall Street events, Chopra and was so struck by the “perceived injustice” fueling the protests that he told a friend: “We need to do something about this.”

The idea for Just Capital emerged from a seminar Chopra held at Columbia Business School called “Just Capital and Cause-Driven Marketing.” A student suggested creating an index of companies based on their value to society, not quarterly profits. Chopra took the idea to Jones, whom he had met through Jones’ wife, Sonia, a yoga and wellness enthusiast.

Jones set up the foundation in 2013, hired a staff and underwrote a survey of 43,000 Americans to determine what people most valued in a company. The No. 1 factor was pay and benefits. (At No. 10 was creating jobs in the United States.) Just Capital plans to publish this year a ranking of the top 1,000 publicly traded companies based on a scale derived from the survey.